Updated January 2012: See Below
Every year, Mandy and I do financial goals. Basically, we make a list of things we want or need to do with money above and beyond our “normal” budget items. That’s one of the best things about being debt free: we have “extra” money that we don’t have to send to creditors. I thought I would share with you the first few goals on our list we are currently working on. Hopefully it will give you an idea of the inner workings of our household finances in order to inspire you. My hope is to add a page to the site that tracks our goals so you can follow along and join us in your goals!
Fully Funded Emergency Fund
Having babies 2 out of the last 3 years has really taken a toll on our emergency fund. Before that, we had a full 3-6 months worth of expenses in savings. However, any extra amount we could squeeze out of the budget for the last 3 years has gone to covering medical expenses, some home remodel to make room for babies, and a vehicle to transport the babies. So, when a few “emergency”-type expenses came up, we couldn’t just adjust our budget and use extra funds like we used to. That meant dipping into the emergency fund which we both absolutely hated doing. Within that time, for example, we had several major car repairs, a couple of furnace problems, a new water heater, and a new computer. All of this has caused our emergency fund to currently sit at about $4,700 (after having adding back into it the last couple of months). Our goal is to get it to $10,000 as soon as possible.
I mentioned above that we had to purchase a larger vehicle to transport our family. In September of 2010, we bought a 2003 Ford Explorer. At some point, we are going to have to replace that and we don’t do car payments. Not in the traditional sense anyway. Instead, we pay ourselves a “car payment” each month into our savings account. Our goal is to get $7,000-$10,000 or so in there over the next several years. We are mostly wanting to accomplish this by putting $200 per month in our regular budget into this fund. We currently have $715 in there. Unfortunately, this is one category that often gets put on the backburner when we have a tight month. So, once the emergency fund is up to $10,000, then we need to make up the “deficit” we owe to our car replacement savings with any extra money we have.
Catch Up Retirement
The third goal also directly relates to having our daughters. Specifically, when we found out we were pregnant with our now two year old, we temporarily stopped our retirement savings to make sure we would be able to save enough for medical costs. At the time, we were only putting $100 per month into retirement, but did $0 for 5 months. The way my mind works, we now owe our retirement savings $500. That may seem wierd to some people, but that is just how I view things. So, once we get the emergency fund and car replacement up where they should be, then we will put an extra $500 into our Roth IRA.
We have about five more after these three that we will get to. The important thing is to take time to discuss these things and know what you are shooting for. It helps Mandy and I keep some discipline when we feel like wasting our money on other things. It gives us the opportunity to weigh the options of “wasting” the money, or instead saving it in order to achieve our goals. Without these goals, I am 100% certain that we would never be where we wanted to be financially five years from now. So, what are your next three financial goals?
**************Update: January 2012***********************
I thought it would be a good time to update you on where we are at with our goals. You can go to our goals page to check out the tracker as we go along.
The short update is we have not gotten anywhere. Things seem to just keep coming down on us, financially speaking. We are hoping all of that is behind us and can really start to make some progress on our goals. Every year, I do a survey of the past year and where we have come since the previous year. I am happy to report that we did have a slight uptick in our net worth. It was only about 3%, but after the year we’ve had, I’ll take it.
realized confirmed that the reason it seems that we can never get ahead on our goals is that we spend too much on medical and food.
We have done everything possible to decrease our monthly medical expenses considering we have Health Savings Account with a family deductible of $10,000. Even then, the premium is not cheap, plus we try to put a couple hundred dollars a month into the account to cover our normal medical expenses for the year (which in a non-baby year are relatively low) and to build a cushion for the next baby!
On the food side, the main problem is that there is five of us. It’s that plain and simple. Mandy does an excellent job of purchasing our food and using coupons and we don’t buy name brand of hardly anything. But, five people just eat a lot of food. In fact, it simply amazes me how much food all three of our girls eat at meal times. They are great eaters, which is a good thing, but it sure does hit the budget hard.
The moral of the story is to take January to really evaluate how the past year has been for you financially. We know that we are blessed to not have any debt (besides the house) and to have somewhat of an emergency fund in place. Without those two things, we’d really be in trouble. So, make this the year to get out of debt and/or build that emergency fund! Next year you can report to me how much your net worth has increased! I know that is our plan!
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